QUESTION: As the acceptable level of detection risk decreases, an auditor may change the: A. timing.

QUESTION: As the acceptable level of detection risk decreases, an auditor may change the: A. timing of tests of controls by performing them at several dates, rather than at one time. B. nature of substantive tests from a less effective to a more effective procedure. C. timing of substantive tests by performing them at an interim date, rather than at year-end. D. assessed level of inherent risk to a higher amount.

Oct 05 2015 05:10 PM

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Subhrata R
answered on October 05, 2015

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ANSWER: B. nature of substantive tests from a less effective to a more effective procedure. Detection risk is defined as the risk that the audit evidence for a segment will fail to detect misstatements exceeding tolerable misstatement. As planned detection risk has decreased, the auditor will (1) select a greater sample size of items to be tested, (2) change the audit tests (substantive procedures) to...

ore effective procedures, and (3) change the timing of substantive tests to perform them at year-end, rather than at an interim date. Inherent risk (and control risk) exists independently of the audit; the auditor cannot change them, but rather react to them in planning.

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